Kusserow on Compliance: Credit balances going to the top of the high risk list

Failing to reconcile credit balances and repaying overpayments has become a new and major threat to providers. Now these acts can be viewed as “reverse false claims” that could easily result in millions of dollars in penalties. The Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) mandated the report and return of overpayments within 60 days of those payments being “identified;” failure to do so creates a reverse false claim.

Credit balances generally occur when the reimbursement that a provider receives for services provided to a beneficiary exceeds the charges billed, such as when a provider receives a duplicate payment for the same services from another third-party payer. It was unclear when the clock on when these balances should be returned started ticking, as neither Congress nor CMS identified when this period begins, leaving it to interpretation by providers. This room for interpretation ended in July of 2015 with a decision by a federal court in a qui tam case. In that matter, the providers were charged with failing to timely investigate and resolve a suspected problem of receiving overpayments. The court ruled that notice of potential violations was sufficient to start the 60-day clock. Holding otherwise would permit willful ignorance to delay the formation of an obligation to repay the government money that is due, the court noted.

A new report, issued by the Office of Inspector General (OIG) has shed some light on to what extent this exposes providers to liability. The OIG examined provider overpayments in Medicaid programs and found that failing to identify and return Medicaid overpayments was a continuing problem. The agency performed reviews in eight states to update prior work on Medicaid credit balances and the report was already in draft when the federal court issued its new ruling. The report found efforts in many states were inadequate to ensure that providers were remitting overpayments in a timely manner and called upon CMS to establish a national Medicaid credit balance reporting mechanism and require its regional offices to monitor reporting.

In a sample review of eight providers in each of the eight highlighted states (total of 64 providers), the OIG report estimated unrecovered overpayments of $24,984,165 (of which $16,833,392 was the federal share). This tiny sample suggests that overpayments received and not paid could be a very significant amount of money. The OIG found that providers did not identify, report, and return Medicaid overpayments because the states did not require that providers exercise reasonable diligence in reconciling patient records. In some cases, it noted that some providers did not reconcile some patient records for more than six years.

Implications of the recent court action and new OIG report

Compliance officers should see a large red flag raised when considering the OIG report and the recent federal court decision. Together, we now see that the courts have drawn a clear line of what constitutes failure to timely remit payments and the OIG has demonstrated an ability to identify unreported overpayments. As such, compliance officers should place this issue near the top of compliance high risk areas. It is advisable to immediately begin to ensure that credit balance management is subject to ongoing monitoring as well as ongoing auditing. Failing to report overpayments may trigger reverse false claims that can result in millions of dollars of liability.

Tips for compliance officers

  • Al Bassett, JD, former Deputy Inspector General and FBI executive with 15 years of health care compliance consulting experience, advises “compliance officers to examine the credit balance issue and ensure that all overpayments are being identified in a timely matter and reported to the executive leadership and the board to ensure they are acted upon and paid back in a timely manner.”
  • Jillian Bower of the Policy Resource Center stated that “the court decision increases the importance of having written guidance already in place to address potential overpayments, including policies for conducting investigations, disclosure, as well as protocols between the compliance officer and legal counsel in handling complaints. Without such written guidance, matters could bog down and run out the clock.”
  • Carrie Kusserow, a senior consultant with over a decade of specialized experience with hotlines, observed that “the recent court case came from a whistleblower, as such it is critical to have an effectively operated hotline to quickly capture any reports of overpayment issues to promptly investigate the matter within the short time frame allowed under the court’s ruling and failing to do so becomes a ticking time bomb under the 60-day rule.”
  • Jim Cottos, who has served as an Interim Compliance Officer for many organizations, along with his experience as former Chief Inspector for the HHS OIG, advised that “organizations must have available trained people to quickly investigate and resolve overpayment issues.”
  • Dr. Cornelia Dorfschmid, a nationally recognized expert on analyzing claims, stated “the biggest challenge with identification of overpayment amounts is to do too little for too long. Hesitation can quickly turn into unreasonable delay and non-compliance. The compliance officer should not let that happen. Getting help from independent and objective experts with the determination of claims accuracy and statistical extrapolation, as well as secondary effects, such as on physician productivity and FMV [fair market value] compensation in RVU [relative value units] based models, is a good idea. It will carry a lot more weight with the government than if internal staff does the work. External review work in these cases is best done under direction of legal counsel.”
  • Camella Boateng, a senior compliance consultant brought up “the old adage that says ‘an ounce of prevention is worth a pound of cure.’ It is far better to avoid making billing errors than dealing with the consequences of failing to do so. As such it is worth remembering advice from the OIG to provide specialized compliance annual training regarding applicable billing rules for those involved in claims processing.”



Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2015 Strategic Management Services, LLC. Published with permission.